It bums me out that more borrowers don’t know about amortization tables. For any fixed rate loan, you can view every payment for its entire term, and see how much of each payment will go towards your principal vs. interest.
I often see posts where people say “I’ve paid X amount every month for 5 years and my balance has only gone down by $3,000”. This is how loans work! The majority of your payment at the beginning of your loan goes towards interest. In the later half of your loan, more of each payment goes towards you principal. At that point, your balance will go down faster.
I don’t blame borrowers for not knowing this, but I wish we had better financial education in the US. (Though I think it’s becoming more common in high school?) Anyways, do yourself a favor and check out your amortization table. Every fixed rate loan must provide it, and you should be able to find it in your account info online.
More people should review their loan’s amortization table
byu/finalgirl2 inpersonalfinance
Posted by finalgirl2
2 Comments
I blame them for not knowing. It is shown to you when you sign. Truth in lending requires it.
Not understanding? That’s different.
The simplest, easiest and cheapest way to lower your mortgage cost overall is to pay the principal amount twice, as early and often as possible.
(Theoretical numbers here-not real:) say the mortgage payment has worked out to $100/month. Payment 1 is $90 interest- $ 10 principal. Adding a $10 principal payment to payment 1 knocks out payment 360 in entirety. Make sure it is APPLIED TO PRINCIPAL, you want to reduce the amount you owe there, not prepay interest. $10 today saves $100 at the end.